On Wall Street, the race is on. No publicly traded company has ever been worth $1 trillion before, but some of the biggest tech names on the market are pretty darn close. For most of the year, Apple (NASDAQ:AAPL) has been the obvious favorite; Apple stock currently sports a market cap of $942 billion.
Of course, a one-horse race isn’t really a race. Although e-commerce giant Amazon (NASDAQ:AMZN) has cooled off in recent weeks, it still sports a market cap of $873 billion, according to Yahoo Finance. Rounding out the leader board is Google’s parent company Alphabet, which is worth $834 billion and, according to CNBC, needed to rally close to 20% as of mid-Monday to hit the $1 trillion threshold.
The odds of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) making a come-from-behind run to be the first $1 trillion company, though, is a long shot in my opinion. Here are three reasons why.
Three Things to Consider With Alphabet Stock
Looking Backward: Alphabet’s pace of growth simply isn’t as impressive as Amazon’s and Apple’s. The five-year chart for all three companies show pretty steady upward climbs, but Alphabet’s gains only tally 116% vs. nearly 500% for Amazon and 220% for Apple. Of course, one could argue that the slower gains leave more room for upside for Alphabet stock, but I think it’s more a sign that the company simply doesn’t have the fuel needed to sprint across the finish line.
That’s not to say its gains won’t continue or that its gains over the last five years are anything to sneeze at. But in this case, we’re talking about a race to a very specific finish line. Pace and comparisons matter.
Looking Forward: Growth estimates for Alphabet are also solid, but not insane. While Amazon is expected to grow earnings by 525% this quarter and 27% in each of the next five years, Alphabet’s estimates are noticeably more modest: 90% growth this quarter vs. 17% growth each year going forward.
Sure, those figures top Apple’s, but the iPhone-maker also has a dividend to lure in investors and bid shares higher. Alphabet cares too much about R&D for such a move. Again, assessing a stock for its prospects regarding an arguably arbitrary but perhaps psychologically relevant level is a bit different than simply assessing when to buy and sell. I don’t think Alphabet stock can swing the upset.
The Supposed Catalyst: Many technical investors thought Alphabet stock had a chance to breakout following yesterday’s earnings report. After the bell, the company reported earnings of $11.75 compared to expectations of $9.59, causing Alphabet stock to jump as much as 5% after hours. But that still leave’s over $100 billion of market cap growth to come, while the other $1 trillion prospects are sure to have catalysts of their own.
Once again, this all isn’t to say that I’m not bullish on Alphabet stock. Instead, I merely think Amazon has shown much more of a kick than Google’s parent company. It’s fun (and good publicity) for technical traders to introduce a new prospect into the race. But being in the running is very different from actually winning.
As of this writing, Robert Martin was long AAPL.
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